Exhibit 10.1
MASTER BOTTLING AGREEMENT
BETWEEN
PEPSICO, INC.
AND
THE PEPSI BOTTLING GROUP, INC.
MASTER BOTTLING AGREEMENT
THIS AGREEMENT, (this "Agreement") effective as of __________ ___,
1998, is made and entered into by and between PEPSICO, INC., a corporation
organized and existing under the laws of the State of North Carolina having its
principal place of business in Purchase, New York (the "Company"), and The Pepsi
Bottling Group, Inc., a corporation organized and existing under the laws of the
State of Delaware having its principal place of business in ▇▇▇▇▇▇, New York
(the "Bottler").
W I T N E S S E T H :
WHEREAS
A. The Company manufactures and sells the concentrates (the
"Concentrates") for the Beverages (as hereinafter defined). The Company
authorizes others to manufacture the syrups prepared from the
Concentrates for the Beverages (the "Syrups") and to manufacture from
the Syrups and sell the soft drinks identified on Schedule A (as
modified from time to time under paragraphs 21 and 22, the
"Beverages"). The formulas for the Concentrates, Syrups and Beverages
constitute trade secrets owned by the Company;
B. The Company is the owner of the trademarks identified on Schedule B
(together with such other trademarks as may be authorized by the
Company from time to time for current use by the Bottler under this
Agreement, the "Trademarks"), which, among other things, identify and
distinguish the Concentrates, the Syrups and the Beverages;
2
C. The primary business of the Bottler is to act as a Bottler of the
Beverages, either directly pursuant to certain agreements with the
Company, all of which are identified on Schedule C (collectively,
together with all amendments thereto, the "Existing Bottling
Appointments"), or indirectly through one or more persons controlling,
controlled by or under common control with the Bottler (the "Bottler
Affiliates");
D. The reputation of the Beverages as being of consistently superior
quality has been a major factor in stimulating and sustaining demand
for the Beverages, and special technical skill and constant diligence
on the part of the Bottler and the Company are required in order for
the Beverages to maintain the excellence that consumers expect; and
E. Conditions affecting the production, sale and distribution of Beverages
have changed since the Company and the Bottler, or its
predecessors-in-interest, entered into the Existing Bottling
Appointments, and as a consequence, the Company and the Bottler desire
to amend the Existing Bottling Appointments, the terms of the Existing
Bottling Appointments, as so amended, being replaced and restated in
the form of this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Bottler agree
as follows:
3
ARTICLE I
THE AUTHORIZATION
1. The Company authorizes the Bottler, and the Bottler undertakes, to
manufacture and package the Beverages and to distribute and sell the
Beverages only in Authorized Containers, as hereinafter defined, under
the Trademarks in and throughout the territories described in Schedule
D (together with any territories added under paragraph 31, and subject
to the possible elimination of subterritories under paragraph 29, the
"Territories").
2. The Company will, from time to time, in its discretion, approve
containers of certain types, sizes, shapes and other distinguishing
characteristics (collectively, subject to any additions, deletions and
modifications by the Company, the "Authorized Containers"). A list of
Authorized Containers for each Beverage will be provided by the Company
to the Bottler, which list may be amended by the Company from time to
time by additions, deletions or modifications. The Bottler is
authorized to use only Authorized Containers in the manufacture,
distribution and sale of the Beverages. The Company reserves the right
to withdraw from time to time its approval of any of the Authorized
Containers upon six (6) months notice to the Bottler, and, in such
event, the repurchase provisions of subparagraph 28(e) shall apply to
containers so disapproved that are owned by the Bottler. The Company
will exercise its right to approve, and to withdraw its approval of,
specific Authorized Containers in good faith so as to permit the
Bottler to continue to fully meet the demand in the Territories as a
whole for Beverages in containers of the nature identified on Schedule
E.
4
ARTICLE II
EXCLUSIVE AUTHORIZATION
3. The Company appoints the Bottler as its sole and exclusive purchaser of
the Concentrates for the purpose of manufacture, packaging and
distribution of the Beverages under the Trademarks in Authorized
Containers for sale in the Territories;
4. The Company agrees not to authorize any other party whatsoever to use
the Trademarks on Beverages in Authorized Containers, or any other
containers of the nature identified on Schedule E, for purposes of
resale in the Territories.
5. The Bottler shall purchase its entire requirements of Concentrates
exclusively from the Company and shall not use any other syrup,
beverage base, concentrate or other ingredient in the Beverages than as
specified by the Company.
ARTICLE III
OBLIGATIONS OF BOTTLER
RELATING TO TRADEMARKS AND OTHER MATTERS
6. The Bottler acknowledges that the Company is the sole and exclusive
owner of the Trademarks, and the Bottler agrees not to question or
dispute the validity of the Trademarks or their exclusive ownership by
the Company. By this Agreement, the Company extends to the Bottler
only: (i) a nonexclusive license to use the trademark "Pepsi-Cola" as
part of the corporate name of the Bottler; and (ii) an exclusive
license to use the Trademarks solely in connection with the
manufacture, packaging,
5
distribution, and sale of the Beverages in Authorized Containers in the
Territories subject to the rights reserved to the Company under this
Agreement. Nothing herein, nor any act or failure to act by the Bottler
or the Company, shall give the Bottler any proprietary or ownership
interest of any kind in the Trademarks or in the goodwill associated
therewith.
7. The Bottler agrees during the term of this Agreement and in accordance
with any requirements imposed upon the Bottler under applicable laws:
(a) Not to produce, manufacture, package, sell, deal in or
otherwise use or handle, directly or indirectly, any "Cola
Product" (herein defined to mean any soft drink beverage which
is generally marketed as a cola product or which is generally
perceived as being a cola product) other than a soft drink
manufactured, packaged, distributed or sold by the Bottler
under authority of the Company;
(b) Not to manufacture, package, sell, deal in or otherwise use or
handle, directly or indirectly, any concentrate, beverage
base, syrup, beverage or any other product which is likely to
be confused with, or passed off for, any of the Concentrates,
Syrups or Beverages;
(c) Not to manufacture, package, sell, deal in or otherwise use or
handle, directly or indirectly, any product under any trade
dress or in any container that is an imitation of a trade
dress or container in which the Company claims a proprietary
interest or which is likely to be confused or cause confusion
or be confusingly similar to or be passed off as such trade
dress or container;
6
(d) Not to manufacture, package, sell, deal in or otherwise use or
handle, directly or indirectly, any product under any
trademark or other designation that is an imitation,
counterfeit, copy or infringement of, or confusingly similar
to, any of the Trademarks; and
(e) Not to acquire or hold, directly or indirectly, any ownership
interest in, or, directly or indirectly, enter into any
contract or arrangement with respect to, the management or
control of, any person within or without the Territories that
engages in any of the activities prohibited by subparagraphs
(a), (b), (c) or (d) of this paragraph 7.
ARTICLE IV
OBLIGATIONS OF BOTTLER RELATING TO
MANUFACTURE AND PACKAGING OF THE BEVERAGES
8.
(a) The Bottler represents and warrants that the Bottler
possesses, or will possess, in the Territories, prior to the
manufacture, packaging and distribution of the Beverages, and
will maintain during the term of this Agreement, such plant or
plants, machinery and equipment, trained staff, and
distribution and vending facilities as are capable of
manufacturing, packaging and distributing the Beverages in
Authorized Containers in accordance with this Agreement, in
compliance with all applicable governmental and administrative
requirements, and in sufficient quantities to fully meet the
demand for the Beverages in Authorized Containers in the
Territories.
7
(b) The Company and the Bottler acknowledge that each is or may
become a party to one or more agreements authorizing a bottler
or other Company-authorized entity to produce Beverages for
sale by another bottler. Such agreements include, but are not
limited to (i) agreements permitting bottlers, subject to
certain conditions, to commence or continue to manufacture the
Beverages for other bottlers, and (ii) agreements pursuant to
which bottlers may have the Beverages manufactured for them by
other Company-authorized entities. It is hereby agreed that
the Company shall not unreasonably withhold (i) any consents
required by such agreements, or (ii) approval of Bottler's
participation in such agreements. All such existing agreements
shall remain in full force and effect in accordance with their
terms.
9. The Bottler recognizes that increases in the demand for the Beverages,
as well as changes in the list of Authorized Containers, may, from time
to time, require adaptation of its existing manufacturing, packaging or
delivery equipment or the purchase of additional manufacturing,
packaging and delivery equipment. The Bottler agrees to make such
modifications and adaptations as necessary and to purchase and install
such equipment, in time to permit the introduction and manufacture,
packaging and delivery of sufficient quantities of the Beverages in the
Authorized Containers, to fully meet the demand for the Beverages in
Authorized Containers in the Territories.
10. The Bottler warrants that the handling and storage of the Concentrates;
the manufacture, handling and storage of the Syrups; and the
manufacture, handling, storage, and packaging of the Beverages shall be
accomplished in accordance with the Company's quality control and
sanitation standards, as reasonably established by the Company and
8
communicated to the Bottler from time to time, and shall, in any event,
conform with all food, labeling, health, packaging and other relevant
laws and regulations applicable in the Territories.
11. The Bottler, in accordance with such instructions as may be given from
time to time by the Company, shall submit to the Company, at the
Bottler's expense, samples of the Syrups, the Beverages and the raw
materials used in the manufacture of the Syrups and the Beverages. The
Bottler shall permit representatives of the Company to have access to
the premises of the Bottler during ordinary business hours to inspect
the plant, equipment, and methods used by the Bottler in order to
ascertain whether the Bottler is complying with the instructions and
standards prescribed for the manufacturing, handling, storage and
packaging of the Beverages.
12.
(a) For the packaging, distribution and sale of the Beverages, the
Bottler shall use only such Authorized Containers, closures,
cases, cartons and other packages and labels as shall be
authorized from time to time by the Company for the Bottler
and shall purchase such items only from manufacturers approved
by the Company, which approval shall not be unreasonably
withheld. Such approval by the Company does not relieve the
Bottler of the Bottler's independent responsibility to assure
that the Authorized Containers, closures, cases, cartons and
other packages and labels purchased by the Bottler are
suitable for the purpose intended, and in accordance with the
good reputation and image of excellence of the Trademarks and
Beverages.
9
(b) The Bottler shall maintain at all times a stock of Authorized
Containers, closures, labels, cases, cartons, and other
essential related materials bearing the Trademarks, sufficient
to fully meet the demand for Beverages in Authorized
Containers in the Territories, and the Bottler shall not use
or permit the use of Authorized Containers, or such closures,
labels, cases, cartons and other materials, if they bear the
Trademarks or contain any Beverages, for any purpose other
than the packaging and distribution of the Beverages. The
Bottler further agrees not to refill or otherwise reuse
nonreturnable containers.
13. If the Company determines the existence of quality or technical
difficulties with any Beverage, or any package used for such product,
the Company shall have the right, immediately and at its sole option,
to withdraw such product or any such package from the market. The
Company shall notify the Bottler in writing of such withdrawal, and the
Bottler shall, upon receipt of notice, immediately cease distribution
of such product or such package therefor. If so directed by the
Company, the Bottler shall recall and reacquire the product or package
involved from any purchaser thereof. If any recall of any product or
any of the packages used therefor is caused by (i) quality or technical
defects in the Concentrate, or other materials prepared by the Company
from which the product involved was prepared by the Bottler, or (ii)
quality or technical defects in the Company's designs and design
specifications of packages which it has imposed on the Bottler or the
Bottler's third party suppliers if such designs and specifications were
negligently established by the Company (and specifically excluding
designs and specifications of other parties and the failure of other
parties to manufacture packages in strict conformity with the designs
and specifications of the Company), the Company shall reimburse the
Bottler for the Bottler's total expenses incident to such recall.
Conversely, if any
10
recall is caused by the Bottler's failure to comply with instructions,
quality control procedures or specifications for the preparation,
packaging and distribution of the product involved, the Bottler shall
bear its total expenses of such recall and reimburse the Company for
the Company's total expenses incident to such recall.
ARTICLE V
CONDITIONS OF PURCHASE AND SALE
14. The Company reserves the right to establish and to revise at any time,
in its sole discretion, the price of any of the Concentrates, the terms
of payment, and the other terms and conditions of supply, any such
revision to be effective immediately upon notice to the Bottler. If
Bottler rejects a change in price or the other terms and conditions
contained in any such notice, then the Bottler shall so notify the
Company within thirty (30) days of receipt of the Company's notice, and
this Agreement will terminate ninety (90) days after the date of such
notification by the Bottler, without further liability of the Company
or the Bottler. The change in price or other terms and conditions so
rejected by the Bottler shall not apply to purchases of such
Concentrate by the Bottler during such ninety (90) day period preceding
termination. Failure by the Bottler to notify the Company of its
rejection of the changes in price or such other terms and conditions
shall be deemed acceptance thereof by the Bottler.
15. The Bottler shall purchase from the Company only such quantities of the
Concentrates as shall be necessary and sufficient to carry out the
Bottler's obligations under this Agreement. The Bottler shall use the
Concentrates exclusively for its manufacture of the Syrups and shall
use the Syrups exclusively for its manufacture of the Beverages. The
Bottler shall not sell
11
or otherwise transfer any Concentrate or Syrup or permit the same to
get into the hands of third parties.
16.
(a) The Bottler agrees not to distribute or sell any Beverage
outside the Territories. The Bottler shall not sell any
Beverage to any person (other than another Bottler pursuant to
subparagraph 8(b)) for ultimate sale outside the Territories.
If any Beverage distributed by the Bottler is found outside of
the Territories, Bottler shall be deemed to have transshipped
such Beverage and shall be deemed to be a "Transshipping
Bottler" for purposes hereof. For purposes of this Agreement,
"Offended Bottler" shall mean a Bottler in any territory into
which any Beverage is transshipped.
(b) In addition to all other remedies the Company may have against
any Transshipping Bottler for violation of this paragraph 16,
the Company may impose upon any Transshipping Bottler a charge
for each case of Beverage transshipped by such Bottler. The
per-case amount of such charge shall be determined by the
Company in its sole discretion. The Company and the Bottler
agree that the amount of such charge shall be deemed to
reflect the damages to the Company, the Offended Bottler and
the bottling system. In addition, the Company may directly
charge the Transshipping Bottler the full amount of all
investigative and other costs incurred by the Company in
connection with the transshipment and such Transshipping
Bottler shall be obligated to pay such amount. The Company
shall forward to the Offended Bottler, upon receipt from the
Transshipping Bottler, the full amount of the per case charge
so received (but not including investigative and other costs
charged to the Transshipping Bottler by the Company). If the
Company or its
12
agent recalls any Beverage which has been transshipped, the
Transshipping Bottler shall, in addition to any other
obligation it may have hereunder, reimburse the Company for
its costs of purchasing, transporting, and/or destroying such
Beverage.
ARTICLE VI
OBLIGATIONS OF THE BOTTLER
RELATING TO THE MARKETING OF THE BEVERAGES
FINANCIAL CAPACITY AND PLANNING
17. The continuing responsibility to increase and fully meet the demand for
the Beverages in Authorized Containers within the Territories rests
upon the Bottler. The Bottler agrees to use all approved means as may
be reasonably necessary to meet this responsibility.
18.
(a) The Bottler will push vigorously the sale of the Beverages in
Authorized Containers throughout the entire Territories.
Without in any way limiting the Bottler's obligation under
this Paragraph 18, the Bottler must fully meet and increase
the demand for the Beverages throughout the Territories and
secure full distribution up to the maximum sales potential
therein through all distribution channels or outlets available
to soft drinks, using any and all equipment reasonably
necessary to secure such distribution; must service all
accounts with frequency adequate to keep them at all times
fully supplied with the Beverages and must use its own
salesmen and trucks, (or salesmen and trucks of independent
distributors, of whom the Company approves), in quantity
adequate for all seasons.
13
(b) The parties agree that to fully meet and increase demand for
the Beverages in Authorized Containers advertising and other
forms of marketing activities are required. Therefore, the
Bottler will spend such funds in advertising and marketing the
Beverages as may be reasonably required to INCREASE, as well
as maintain, demand for the Beverages in Authorized Containers
in the Territories. The Bottler shall fully cooperate in and
vigorously push all cooperative advertising and sales
promotion programs and campaigns that may be reasonably
established by the Company for the Territories. The Bottler
will use and publish only such advertising, promotional
materials or other items bearing the Trademarks relating to
the Beverages as the Company has approved and authorized. The
expenditures required by this Article VI shall be made by the
Bottler. The Company may, in its sole discretion, contribute
to such expenditures. The Company may also undertake, at its
expense, independently of the Bottler's marketing programs,
any advertising or promotional activity that the Company deems
appropriate to conduct in the Territories, but this shall in
no way affect the responsibility of the Bottler for increasing
the demand for the Beverages in Authorized Containers in the
Territories.
19. The Bottler and all Bottler Affiliates shall maintain the consolidated
financial capacity reasonably necessary to assure that the Bottler and
all Bottler Affiliates directly or indirectly controlled by the Bottler
will be financially able to perform their respective duties and
obligations under this Agreement and under all other agreements between
the Company and Bottler Affiliates regarding the manufacture,
packaging, distribution and sale of the Beverages in "authorized
containers" (as defined in such agreements).
14
20.
(a) The Company and the Bottler have agreed upon a business plan
for the first three years occurring during the term of this
Agreement. Since periodic planning is essential for the proper
implementation of this Agreement, the Bottler and the Company
shall meet each year at such date as the parties may set (but
no later than ninety (90) days prior to the commencement of
any calendar year during the term of this Agreement beginning
with the commencement of the calendar year closest to the
anniversary date of this Agreement), to discuss the Bottler's
plans for the ensuing three (3) year period. At such meeting,
the Bottler shall present a plan that sets out in reasonable
detail satisfactory to the Company: (i) the marketing plans,
management plans and advertising plans of the Bottler with
respect to the Beverages for the ensuing year, including a
financial plan showing that the Bottler and all Bottler
Affiliates have the consolidated financial capacity to perform
their respective duties and obligations under this Agreement
and any other agreement with the Company regarding the
manufacture, packaging, distribution and sale of the Beverages
in "authorized containers" (as defined in such agreements) and
(ii) the projected sales, marketing and advertising plans and
related capital expenditures for the two years immediately
following such year. Senior management of the Company and the
Bottler shall discuss this plan and this plan, upon approval
by the Company (represented by such senior management), which
shall not be unreasonably withheld, shall define the Bottler's
obligation herein to maintain such consolidated financial
capacity and to increase and fully meet the demand for the
Beverages in Authorized Containers in the Territories for the
period of time covered by the plan.
15
(b) The Bottler shall report to the Company periodically, but not
less than quarterly, as to its implementation of the approved
plan; it is understood, however, that the Bottler shall report
sales on a regular basis as requested by the Company and in
such format and detail, and containing such information as may
be reasonably requested by the Company. The failure by the
Bottler to carry out the plan, or if the plan is not presented
or is not approved, will constitute a primary consideration
for determining whether the Bottler has fulfilled its
obligation to maintain the consolidated financial capacity
required under paragraph 19 and to push vigorously the sale of
Beverages in Authorized Containers throughout the Territories
and to increase and fully meet the demand for the Beverages in
Authorized Containers in the Territories. If the Bottler
carries out the plan in all material respects, it shall be
deemed to have satisfied the obligations of the Bottler under
paragraphs 17, 18, 19 and 20 for the period of time covered by
the plan.
ARTICLE VII
REFORMULATION, NEW PRODUCTS AND RELATED MATTERS
21. The Company has the sole and exclusive right and discretion to
reformulate any of the Beverages. In addition, the Company has the sole
and exclusive right and discretion to discontinue any of the Beverages
under this Agreement, provided (i) such Beverage is discontinued on a
national basis in Authorized Containers and in such other containers as
may have been authorized for use by other Bottlers under their
respective bottle contracts, and (ii) the Company does not discontinue
all Beverages under this Agreement. In the event that the Company
discontinues any
16
Beverage, Schedule A to this Agreement shall be deemed amended by
deleting the discontinued Beverage from the list of Beverages set forth
on Schedule A.
22. In the event that the Company introduces any new beverage in the
Territories under the trademarks "Pepsi-Cola" or "Pepsi" or any
modification thereof (herein defined to mean the addition of a prefix,
suffix or other modifier used in conjunction with the trademarks
"Pepsi-Cola" or "Pepsi"), the Bottler shall be obligated to
manufacture, package, distribute and sell such new beverage in
Authorized Containers in the Territories pursuant to the terms and
conditions of this Agreement, and Schedule A to this Agreement shall be
deemed amended by adding such new beverage to the list of beverages set
forth on Schedule A.
23. The Company has the unrestricted right to use the Trademarks on the
Beverages and on all other products and merchandise other than the
Beverages in Authorized Containers in the Territories.
ARTICLE VIII
TERM AND TERMINATION OF THE AGREEMENT
24. The term of this Agreement shall commence on the effective date hereof
and, unless earlier terminated in accordance with its provisions, will
continue perpetually.
25. The obligation to supply Concentrates to the Bottler and the Bottler's
obligation to purchase Concentrates from the Company and to
manufacture, package, distribute and sell the Beverages under this
17
Agreement shall be suspended during any period when any of the
following conditions exist:
(a) There shall occur a change in the law or regulation
(including, without limitation, any government permission or
authorization regarding customs, health or manufacturing) in
such a manner as to render unlawful or commercially
impracticable:
(i) the importation of Concentrate or any of its
essential ingredients, which cannot be produced in
quantities sufficient to satisfy the demand therefor
by existing Company facilities in the United States;
or
(ii) the manufacture and distribution of the Concentrates
or Beverages; or
(b) There shall occur any inability or commercial impracticability
of either of the parties to perform resulting from an act of
god, or "force majeure," public enemies, boycott, quarantine,
riot, strike, or insurrection, or due to a declared or
undeclared war, belligerency or embargo, sanctions,
blacklisting, or other hazard or danger incident to the same,
or resulting from any other cause whatsoever beyond its
control.
If any of the conditions described in this paragraph 25 persists so
that either party's obligation to perform is suspended for a period of
six (6) months or more, the other party may terminate this Agreement
forthwith, upon notice to the party whose obligation to perform is
suspended.
18
26.
(a) The Company may terminate this Agreement in the event of the
occurrence of any of the following events of default:
(i) If the Bottler or Bottler Subsidiary becomes
insolvent; if a petition in bankruptcy is filed
against or on behalf of the Bottler or Bottler
Subsidiary which is not stayed or dismissed within
sixty (60) days; if the Bottler or Bottler Subsidiary
is put in liquidation or placed under sequester; if a
receiver is appointed to manage the business of the
Bottler or Bottler Subsidiary; or if the Bottler or
Bottler Subsidiary enters into any judicial or
voluntary arrangement or composition with its
creditors, or concludes any similar arrangements with
them or makes an assignment for the benefit of
creditors;
(ii) If the Bottler or Bottler Subsidiary adopts a plan of
dissolution or liquidation;
(iii) If any person or any Affiliated Group (as hereinafter
defined), other than any person or any Affiliated Group acting
with the consent of the Company, acquires, or obtains any
contract, option, conversion privilege or other right to
acquire, directly or indirectly, Beneficial Ownership (as
hereinafter defined) of more than fifteen percent (15%) of any
class or series of voting securities of the Bottler or Bottler
Subsidiary and if such person or Affiliated Group does not
divest itself of Beneficial Ownership of such voting
securities or otherwise terminate any such contract, option,
conversion privilege or other right to a level equal to or
below fifteen percent (15%) within thirty (30) days after the
Company notifies the Bottler that the
19
failure of such person or Affiliated Group to thus divest or
terminate may result in termination of this Agreement;
(iv) If any Disposition (as hereinafter defined) is made without
the consent of the Company by Bottler or by any Bottler
Subsidiary of any voting securities of any Bottler Subsidiary;
(v) If any agreement regarding the manufacture, packaging,
distribution or sale of the Beverages in "authorized
containers" (as defined in such agreement) between the Company
and any person that controls, directly or indirectly, the
Bottler is terminated, unless the Company agrees in writing
that this subparagraph 26(a)(v) will not be applied by the
Company to such termination;
(vi) If the Bottler or any person in which the Bottler has
Beneficial Ownership of any equity or voting securities, or in
which the Bottler has a right or control of management, or
which controls or is under common control with the Bottler,
should engage directly or indirectly in the manufacture,
distribution or marketing of any product specified in
subparagraphs (a), (b), (c) or (d) of paragraph 7 above, or
should obtain a right or license to do the same, and if the
Company has given the Bottler notice that such condition
exists and that the Company will terminate this Agreement
within six (6) months if such condition is not eliminated, and
if such condition has not been eliminated within the six (6)
month period.
(vii) If all or substantially all of the Bottler's or Bottler
Subsidiary's bottling assets are sold, transferred or
otherwise disposed of (including any transfer by operation of
law) other than sales, transfers or other dispositions of
assets by the Bottler or one or
20
more Bottler Subsidiary to one or more wholly-owned subsidiary
of such Bottler or such Bottler Subsidiary.
(viii) If the Bottler or any Bottler Subsidiary shall engage in any
business other than (x) the business of manufacturing, selling
or distributing non-alcoholic beverages or (y) any business
which is directly related and incidental to such beverage
business.
(b) The Bottler covenants and agrees with the Company:
(i) to notify the Company promptly in the event of or
upon obtaining knowledge of any third party action
which may or will result in any change in ownership
described in Section 26(a)(iii) above;
(ii) to make available from time to time and at the
request of the Company complete records of current
ownership of the Bottler and full information
concerning any entities or parties by whom it is
controlled directly or indirectly or which it
controls; and
(iii) to the extent the Bottler has any legal control over
changes in the ownership of the Bottler or any entity
having direct or indirect ownership or control of the
Bottler as described in Section 26(a)(iii) above, not
to initiate or implement, consent to or acquiesce in
any such change without the prior written consent of
the Company.
(c) For the purposes of this Agreement:
21
(i) "Affiliated Group" shall mean two or more persons
acting as a partnership, limited partnership,
syndicate or other group, or who agrees to act
together, for the purpose of acquiring, holding,
voting or making any Disposition of any voting
securities of the Bottler; provided further that the
Affiliated Group formed thereby shall be deemed to
have acquired Beneficial Ownership of all voting
securities of the Bottler beneficially owned by any
such persons.
(ii) "Beneficial Ownership" shall mean (i) voting power
which includes the power to vote, or to direct the
voting of, any securities, or (ii) investment power
which includes the power to dispose, or to direct the
Disposition of, any securities; provided further
Beneficial Ownership shall include any such voting
power or investment power which any person has or
shares, directly or indirectly, through any contract,
arrangement, understanding, relationship or
otherwise; provided, however, that the following
persons shall not be deemed to have acquired
Beneficial Ownership under the circumstances
described: (a) a person engaged in business as an
underwriter of securities who acquires securities
through his participation in good faith in a firm
commitment underwriting registered under the
Securities Act of 1933 shall not be deemed to be the
Beneficial Owner of such securities until such time
as such underwriter completes his participation in
the underwriting and shall not thereupon or
thereafter be deemed to be the Beneficial Owner of
the securities acquired by other members of any
underwriting syndicate or selected dealers in
connection with such underwriting solely by reason of
customary underwriting or
22
selected dealer arrangements; (b) a member of a
national securities exchange shall not be deemed to
be a Beneficial Owner of securities held directly or
indirectly by it on behalf of another person solely
because such member is the record holder of such
securities and, pursuant to the rules of such
exchange, may direct the vote of such securities,
without instruction, on other than contested matters
or matters that may affect substantially the rights
or privileges of the holders of the securities to be
voted, but is otherwise precluded by the rules of
such exchange from voting without instruction; and
(c) the holder of a proxy solicited by the Board of
Directors of the Bottler for the voting of securities
of such Bottler at any annual or special meeting and
any adjournment or adjournments thereof of the
stockholders of such Bottler shall not be deemed to
be a Beneficial Owner of the securities that are the
subject of the proxy solely for such reason.
(iii) "Bottler Subsidiary" shall mean any person that is
controlled directly or indirectly by the Bottler and
either participates in the manufacture, packaging,
distribution or sale of the Beverages in Authorized
Containers or has a direct or indirect equity
interest in another Bottler Subsidiary that does so
participate;
(iv) "Disposition" shall mean any sale, merger, issuance
of securities, or other transaction in which, or as a
result of which, any person other than Bottler or a
wholly owned subsidiary of Bottler, acquires, or
obtains any contract,
23
option, conversion privilege or other right to
acquire Beneficial Ownership of any securities.
(d) Upon the occurrence of any of the events of default specified
in subparagraphs 26(a) and (b), the Company may terminate this
Agreement by giving the Bottler notice to that effect,
effective immediately.
27.
(a) In addition to the events of a default described in paragraph
26, the Company may also terminate this Agreement, subject to
the limitations of subparagraph 27(b), in the event of the
occurrence of any of the following events of default:
(i) If the Bottler fails to make timely payment for
Concentrate or of any other debt owing to the
Company;
(ii) If the condition of the plant or equipment used by
the Bottler in manufacturing, packaging or
distributing the Beverages fails to meet the sanitary
standards reasonably established by the Company;
(iii) If the Syrups or Beverages manufactured by the
Bottler fail to meet the quality control standards
reasonably established by the Company;
(iv) If the Beverages are not manufactured in strict
conformity with such standards and instructions as
the Company may reasonably establish;
24
(v) If the Bottler fails to present or carry out a plan
approved under paragraph 20 in all material respects;
or
(vi) If the Bottler materially breaches any of the
Bottler's other obligations under this Agreement.
The standards and instructions of the Company comprise
privately published information concerning the manufacture,
handling and storage of the Beverages under good manufacturing
practices, as well as technical instructions, bulletins and
other communications issued or amended from time to time by
the Company.
(b) Upon the occurrence of any of the foregoing events of default,
the Company shall, as a condition to termination of this
Agreement under this paragraph 27, give the Bottler notice
thereof. The Bottler shall then have a period of sixty (60)
days within which to cure the default, including, at the
instruction of the Company and at the Bottler's expense, by
the prompt withdrawal from the market and destruction of any
Syrup or Beverage that fails to meet the quality control
standards of the Company or any Beverage that is not
manufactured in accordance with the instructions of the
Company. If such default has not been cured within such
period, then the Company may, by giving the Bottler further
notice to such effect, suspend sales to the Bottler of
Concentrates and require the Bottler to cease production of
the Syrups and the Beverages and the packaging and
distribution of Beverages in Authorized Containers. During
such second period of sixty (60) days, the Company also may
supply, or cause or permit others to supply, the Beverages in
Authorized Containers under the Trademarks in the
25
Territories. If such default has not been cured during such
second period of sixty (60) days, then the Company may
terminate this Agreement, by giving the Bottler notice to such
effect, effective immediately.
28. Upon the termination of this Agreement:
(a) The Bottler shall forthwith take such action as necessary to
eliminate the trademark "Pepsi-Cola" from its corporate name;
(b) Any other agreement between the Company and the Bottler
regarding the manufacture, packaging, distribution, sale or
promotion of soft drinks in "authorized containers" (as
defined in such agreement) may, at the election of the
Company, be automatically terminated and thereby become of no
further force or effect.
(c) The Bottler shall not thereafter continue to manufacture,
package, distribute or sell any of the Beverages in Authorized
Containers or to make any use of the Trademarks or Authorized
Containers, or any closures, cases, labels or advertising
material bearing the Trademarks;
(d) The Bottler shall forthwith remove and efface all reference to
the Company, the Beverages and the Trademarks from the
business premises and equipment of the Bottler and from all
business papers and advertising used or maintained by the
Bottler; and it shall not thereafter hold forth in any manner
whatsoever that it has any connection with the Company or the
Beverages; and,
26
(e) The Bottler shall forthwith deliver all Concentrate, Syrup,
Beverage, usable returnable or any nonreturnable containers,
cases, closures, labels, and advertising material bearing the
Trademarks, still in the Bottler's possession or under the
Bottler's control, to the Company or the Company's nominee, as
instructed, and, upon receipt, the Company shall pay to the
Bottler a sum equal to the reasonable market value of such
supplies or materials. The Company will accept and pay for
only such articles as are, in the opinion of the Company, in
first-class and usable condition, and all other such articles
shall be destroyed at the Bottler's expense. Containers,
closures and advertising material and all other items bearing
the name of the Bottler, in addition to the Trademarks, that
have not been purchased by the Company shall be destroyed
without cost to the Company, or otherwise disposed of in
accordance with instructions given by the Company, unless the
Bottler can remove or obliterate the Trademarks therefrom to
the satisfaction of the Company. The provisions for repurchase
contained in subparagraph 28(e) shall apply with regard to any
Authorized Container, approval of which has been withdrawn by
the Company under paragraph 2; upon termination by either
party under paragraph 25; and upon termination by the Bottler
under subparagraph 14. In all other cases, the Company shall
have the right, but not the obligation, to purchase the
aforementioned items from the Bottler.
29.
(a) Subject to the limitations set forth in subparagraph 29(b), in
the event that the Bottler at any time fails to carry out a
plan approved under paragraph 20 in all material respects in
any segment of the Territories, whether defined geographically
or by type of market or
27
outlet, which segment shall be defined by the Company
(hereinafter "Subterritory"), the Company may reduce the
Territories covered by this Agreement, and thereby restrict
the Bottler's authorization hereunder to the remainder of the
Territories, by eliminating the Subterritory from the
Territories covered by this Agreement.
(b) In the event of such failure, the Company may eliminate
Subterritories from the Territories covered by this Agreement
by giving the Bottler notice to that effect, which notice
shall define the Subterritory or Subterritories to which the
notice applies. The Bottler shall then have a period of six
(6) months within which to cure such failure. If the Bottler
has not cured such failure in such six (6) month period, the
Company may eliminate such Subterritory or Subterritories from
the Territories by giving the Bottler further notice to that
effect, effective immediately.
(c) Upon elimination of any Subterritory from the Territories:
(i) Schedule D to this Agreement shall be deemed amended
by eliminating such Subterritory from the Territories
described on Schedule D;
(ii) The Company may manufacture, package, distribute and
sell the Beverages in Authorized Containers under the
Trademarks in such Subterritory, or authorize others
to do so;
(iii) Any other agreement between the Bottler and the
Company regarding the manufacture, packaging,
distribution or sale of
28
soft drinks in "authorized containers" (as defined in
such agreement) in such Subterritory may, at the
election of the Company, be automatically terminated
and thereby become of no further force or effect in
such Subterritory;
(iv) The Bottler shall not thereafter continue to
manufacture, package, distribute or sell any of the
Beverages in Authorized Containers in such
Subterritory, or to make any use of the Trademarks,
Authorized Containers, closures, cases, labels or
advertising material bearing the Trademarks in
connection with the sale or distribution of the
Beverages in such Subterritory; and
(v) The Bottler shall not thereafter hold forth in such
Subterritory in any manner whatsoever that it has any
connection with the Beverages.
ARTICLE IX
TRANSFERABILITY/ADDITIONAL TERRITORIES
30. The Bottler hereby acknowledges the personal nature of the Bottler's
obligations under this Agreement with respect to the performance
standards applicable to the Bottler, the dependence of the Trademarks
on proper quality control, the level of marketing effort required of
the Bottler to increase demand for the Beverages in Authorized
Containers, and the confidentiality required for protection of the
Company's trade secrets and confidential information. In recognition of
the personal nature of these and other obligations of the Bottler under
this Agreement, the Bottler may
29
not assign, transfer or pledge this Agreement or any interest therein,
in whole or in part, whether voluntarily, involuntarily, or by
operation of law (including, but not limited to, by merger or
liquidation), or delegate any material element of the Bottler's
performance thereof, or sublicense its rights hereunder, in whole or in
part, to any third party or parties, without the prior consent of the
Company. Any attempt to take such action without such consent shall be
void and shall be deemed to be a material breach of this Agreement.
31.
(a) The Company and the Bottler have agreed upon an area (the
"Specified Area") consisting of territories in which, as of
the date hereof, sales of approximately fourteen percent (14%)
of all sales of Company licensed beverages in the United
States occur. The Bottler hereby agrees that it will not
acquire or attempt to acquire, directly or indirectly, without
the prior written consent of the Company, the right to
manufacture and sell any of the Beverages in Authorized
Containers or any equity or economic interest in any entity
having such rights in any territory located outside the
Specified Area. Any acquisition of such rights by the Bottler
within the Specified Area shall be subject to the approval of
the Company which approval shall not be withheld if, (i) the
Bottler has successfully negotiated the acquisition of such
rights for any such territories with the holder thereof and
(ii) in the reasonable judgment of the Company, the Bottler
has satisfactorily performed its obligations under this
Agreement.
(b) In the event that the Bottler acquires the right to
manufacture and sell any of the Beverages in any container
that has been
30
designated as an Authorized Container in any territory in the
United States outside of the Territories, such additional
territory shall automatically be deemed to be included within
the Territories covered by this Agreement for all purposes.
Any separate agreement that may exist concerning such
additional territory shall be ipso facto amended to conform to
the terms of this Agreement. In addition, if the Bottler
acquires control, directly or indirectly, of any person which
is a party, or which controls directly or indirectly a party,
to an agreement whereby such party has the right to
manufacture and sell any of the Beverages in any territory in
the United States in any container that has been designated as
an Authorized Container, the Bottler shall cause such party to
amend such agreement, effective as of the date of acquisition
of control of such party, to conform to the terms of this
Agreement with respect to all such territory in the United
States.
ARTICLE X
LITIGATION
32.
(a) The Company reserves the right to institute any civil,
administrative or criminal proceeding or action, and generally
to take or seek any available legal remedy it deems desirable,
for the protection of its good reputation and industrial
property rights (including, but not limited to, the
Trademarks), as well as for the protection of the
Concentrates, the Syrups, the Beverages and the formulas
therefor, and to defend any action affecting these matters. At
the request of the Company, the Bottler will render reasonable
assistance in any such action. The Bottler may not claim any
right
31
against the Company as a result of such action or for any
failure to take such action. The Bottler shall promptly notify
the Company of any litigation or proceeding instituted or
threatened affecting these matters. The Bottler shall not
institute any legal or administrative proceeding against any
third party which may affect the interests of the Company in
connection with this Agreement without the Company's prior
consent.
(b) The Company has the sole and exclusive right and
responsibility to prosecute and defend all suits relating to
the Trademarks. The Company may prosecute or defend any suit
relating to the Trademarks in the name of the Bottler whenever
an issue in such suit involves the Territories and therefore
it is appropriate to act in the Bottler's name, or may proceed
alone in the name of the Company, provided that the Company
shall take no action in the Bottler's name which the Company
knows or should know will materially prejudice or impair the
rights or interests of the Bottler under this Agreement.
(c) The Bottler recognizes the importance and benefit to itself
and all other bottlers of the Beverages of protecting the
interest of the Company in the Beverages, Authorized
Containers and the goodwill associated with the trademarks.
Therefore, the Bottler agrees to consult with the Company on
all products liability claims or lawsuits brought against the
Bottler in connection with the Beverages or Authorized
Containers and to take such action with respect to the defense
of any such claim or lawsuit as the Company may reasonably
request in order to protect the interest of the company in the
Beverages, Authorized Containers and goodwill associated with
the Trademarks. Further, the Bottler shall
32
supervise, control and direct the defense of all such products
liability claims and lawsuits brought against them whether
individually or jointly, provided, however, that the Bottler
and the Company expressly reserve all rights of contribution
and indemnity as prescribed by law.
ARTICLE XI
AUTOMATIC AMENDMENT
33. In the event that bottlers, which purchased for their own account
eighty percent (80%) or more of all of the Concentrate for Beverages
purchased for the account of all bottlers who are parties to agreements
with the Company containing substantially the same terms as this
Agreement, agree with the Company to any different provisions to be
included in this Agreement, then the Bottler hereby agrees to include
an amendment containing such different provisions in this Agreement.
The gallons of Concentrate purchased by such bottlers shall be
determined based on the most recently-ended calendar year prior to the
date such amendment was first offered to bottlers.
ARTICLE XII
GENERAL
34. For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(a) "person" means an individual, a corporation, a partnership, a
limited partnership, an association, a joint-stock company, a
trust,
33
any unincorporated organization, or a government or political
subdivision thereof.
(b) "control" (including terms "controlling", "controlled by" and
"under common control with") means: (i) Beneficial Ownership
of a majority of any class or series of voting securities of a
person; or (ii) the power or authority, directly or
indirectly, to elect or designate a majority of the members of
the board of directors, or other governing body of a person.
35. The Company hereby reserves for its exclusive benefit all rights of the
Company not expressly granted to the Bottler under the terms of this
Agreement.
36.
(a) Without relieving the Bottler of any of its responsibilities
under this Agreement, the Company, from time to time during
the term of this Agreement, at its option and either free of
charge or on such terms and conditions as the Company may
propose, may offer technology to the Bottler which the Company
possesses, develops or acquires (and is free to furnish to
third parties without obligation) relating to the design,
installation, operation and maintenance of the plant and
equipment appropriate for the maintenance of product quality,
sanitation and safety as well as for the efficient manufacture
and packaging of the Beverages; or relating to personnel
training, accounting methods, electronic data processing and
marketing and distribution techniques.
34
(b) The Bottler covenants and agrees that, so long as this
agreement is in effect the Bottler shall install and maintain
management information systems that are capable of interfacing
and sharing required data with the management information
systems of the Company in accordance with standards
established by the Company.
37. The Bottler agrees:
(a) it will not disclose to any third party any nonpublic
information whatsoever concerning the composition of the
Concentrates, the Syrup or the Beverages, without the prior
consent of the Company, and it will use any such information
solely to perform its obligations hereunder;
(b) It will at all times treat and maintain as confidential, all
nonpublic information that it may receive at any time from the
Company, including, but not limited to:
(i) Information or instructions of a technical or other
nature, relating to the mixing, sale, marketing and
distribution of the product.
(ii) Information about projects or plans worked out in the
course of this Agreement; and
(iii) Information constituting manufacturing or commercial
trade secrets.
35
The Bottler, further agrees to disclose such information, as necessary
to perform its obligations hereunder, only to employees of its
enterprise: (i) who have a reasonable need to know such information;
(ii) who have agreed to keep such information secret; and (iii) whom
the Bottler has no reason to believe is untrustworthy; and
(c) Upon the termination of this Agreement, Bottler will promptly
surrender to the Company all original documents and all
photocopies or other reproductions in its possession
(including, but not limited to, any extracts or digests
thereof) containing or relating to any nonpublic information
described in this paragraph 37. Following such termination,
and the surrender of such materials, the Bottler and its
employees shall continue to hold any nonpublic information in
confidence and refrain from any further use or disclosure
thereof whatsoever, provided that such obligation shall expire
as to any nonpublic information that does not constitute trade
secrets ten (10) years following such termination.
38. The Bottler agrees that it will not enter into any contract or other
arrangement to manage or participate in the management of any other
Pepsi-Cola bottler without the prior consent of the Company.
39. The Bottler is an independent manufacturer and not the agent of the
Company. The Bottler agrees that it will not represent that it is an
agent of the Company nor hold itself out as such.
40. The Bottler covenants and agrees that, so long as this Agreement is in
effect the Bottler shall deliver to Company:
36
(i) Quarterly Statements. As soon as such statements are made
available to the public, or if such statements are not
regularly made available to the public, within thirty days
after such fiscal quarter, an unaudited income and expense
statement and balance sheet for the Bottler certified as
correct by the chief financial officer of the Bottler; and
(ii) Annual Audit Statement. As soon as such statements are made
available to the public, or if such statements are not
regularly made available to the public, within 120 days after
the end of each fiscal year, statements of income and retained
earnings of the Bottler for the just-ended fiscal year, and a
balance sheet of the Bottler as of the end of such year,
accompanied by an opinion from the independent public
accountants of the Bottler; and
(iii) Other information. With reasonable promptness such other
financial information as the Company may reasonably request in
such format as the Company may reasonably request.
41. The Bottler shall maintain its books, accounts and records in
accordance with generally accepted accounting principles and shall
permit any person designated in writing by the Company to visit and
inspect any of its properties, corporate books and financial records
(including, but not limited to, auditor's workpapers), and make copies
thereof and take extracts therefrom, and to discuss the accounts and
finances of the Bottler with the principal officers thereof, all at
such times as the Company may reasonably request. The Company's rights
of inspection under this paragraph 41 shall be exercised reasonably,
and only for purposes of determining Bottler's compliance with its
obligations under paragraph 19, so as not to interfere with the normal
operation of the Bottler's business.
37
The Company will treat and maintain as confidential for a period of one
year all nonpublic financial information received from the Bottler.
42. The parties agree:
(a) The Existing Bottling Appointments identified on Schedule C
are hereby superseded and restated in their entirety, and all
rights, duties and obligations of the Company and the Bottler
regarding the Trademarks and the manufacture, packaging,
distribution and sale of the Beverages in Authorized
Containers shall be determined under this Agreement, without
regard to the terms of any prior agreement and without regard
to any prior course of conduct between the parties;
(b) As to all matters addressed herein, this Agreement sets forth
the entire agreement between the Company and the Bottler, and
all prior understandings, commitments or agreements relating
to such matters between the parties or their predecessors
-in-interest are of no force or effect; and
(c) Any waiver or modification of this Agreement or any of its
provisions, and any notices given or consents made under this
Agreement shall not be binding upon the Bottler or the Company
unless made in writing, signed by an officer of the Company or
by a duly qualified and authorized representative of the
Bottler, and personally delivered or sent by telegram, telex
or certified mail to an officer of the Company (if from the
Bottler) or a duly qualified and authorized representative of
the Bottler (if from the Company) at the principal address of
such party.
38
43. Failure of the Company to exercise promptly any option or right herein
granted or to require strict performance of any such option or right
shall not be deemed to be a waiver of such option or right, or of the
right to demand subsequent performance of any and all obligations
herein imposed upon the Bottler.
44. The Company may delegate any of its rights, performance or obligations
under this Agreement to any subsidiaries or affiliates of the Company
upon notice to the Bottler, but no such delegation shall relieve the
Company of its obligations hereunder.
45. If any provision of this Agreement, or the application thereof to any
party or circumstance shall ever be prohibited by or held invalid under
applicable law, such provision shall be ineffective to the extent of
such prohibition without invalidating the remainder of such provision
or any other provision hereof, or the application of such provision to
other parties or circumstances.
39
46. This Agreement shall be governed, construed and interpreted under the
laws of the State of New York.
IN WITNESS WHEREOF, the parties have duly executed this Agreement in triplicate
effective as of the day and year first above written.
PEPSICO, INC. THE PEPSI BOTTLING GROUP, INC.
By:______________________________ By:______________________________
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
40